Challenges in the Airline Industry
A Need for Improvement in Quality and Service Levels

Executive SummaryAir travel is said to be one of the safest and most convenient form of transportation. Business and leisure travelers both relish the thought of reaching their destination as quickly as possible. Frequent fliers enjoy the perks that their constant travel brings; whether it is free upgrades, free flights, points accumulation, or easy boarding. Vacationers opt for air travel so they may visit far off places and exotic destinations that are unreachable by rail or car. There are so many choices travelers have to make in order to have an enjoyable journey. The large number of airlines, both regional and international, the choice of economy or first class, non-stop or lay-over, and many other factors are involved in the decision making for travelers to reach their destination economically and on time. An interesting majority of people express their dislike of flying, but still choose air travel as their mode of transportation. Again, the main reason for this may be because it is the shortest distance between here and there. Airline executives and investors have enjoyed the growth and popularity of air travel as well. Over the years, the airline industry has grown to be a billion dollar industry. The combination of marketing strategies and price wars to boost competition, technological advancements, and deregulation have all attributed to the wealth of this industry. Along with the billion-dollar price tag comes a myriad of problems and challenges. Though air travel is still a popular mode of transportation, the industry has endured a number of financial struggles, poor quality and service for internal and external customers, and safety concerns. Some airlines have struggled so much with these challenges that they have been acquired by other airlines for survival, or have had to clip their wings for permanent grounding. There are some key areas in the airline industry that have had a direct impact on its loss of profits, popularity and credibility. The past decade have brought many challenges to the airline industry and have forced it to reexamine some policies and practices. The airline industry may not need an entire overhaul, but does stand room for some major renovations.

Airline Industry OverviewThe commercial airline industry emerged within the first two decades of the twentieth century, with Europe leading the way. Prior to the First World War, people began to become interested in air travel during demonstrations and airplane races. At the conclusion of the war, “the first commercial airplane routes were set up in Europe, using wartime pilots and decommissioned war planes (Columbia Encyclopedia, 2008, para. 1). The United States did not begin to develop commercial airlines until the quarter century mark when the government began generous payments of subsidies to private carriers to deliver the mail. These private carriers also included passengers on their routes. Over the next five years, many well-known U.S. airline carriers were established, including United Airlines, American Airlines and Delta (Columbia Encyclopedia, 2008, para. 2). PanAm and TWA were both established at this time as well, but later would suffer an unsuccessful fate. Air travel began to catch on particularly due to Charles Lindbergh’s transatlantic flight in the late 1920s. Technology began to advance as Boeing and Lockheed starting producing commercial aircraft. By the end of World War II, air travel had increased to over 16 million passengers and defined routes, air fares, and safety guidelines had been established (Columbia Encyclopedia, 2008, para. 3). Over the next three decades, the airline industry became a more established and reliable industry, creating competition for other transportation outlets. The government was closely monitoring the industry, ensuring pricing remained balanced and also ensuring that air travel remained...

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...Hhhhhh Structure
Only looking at passenger travel, maintenance and cargo not included.
Back in the days: Full Service Carriers (FSC) controlling the market (sometimes close to oligopoly). Afterwards, low cost carriers (LCC) entered the market, as well as charter airlines (CC) (cheap cause crappy times)
Change is costs (hubs and smoke vs point-to-point without a home base), based on several routes
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Alliances: sharing prices, sharing frequent flyer programs Skyteam
2nd: integrated units (processes aligned) KLM-Northwest
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4th: full merger
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 Delta and Northwest (Oct 09)
 USAir and America West
 PP t ti l f Additi l R ti M otential for Additional Reactionary Moves
 Recent International Consolidation
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 Air France and KLM
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...

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Introduction
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Scope & Size Of the Industry
In 2011, over 2.8 billion passengers were carried between the world’s airlines. This demonstrates the mass appeal to transportation by air and the fact that it allows employment to over 56 million people worldwide in aviation and tourism. (ATAG, 2012). To put the airlineindustry into perspective, it would rank 19th in the world generating $539 billion dollars GDP per year. This is considerably larger than some G20 countries, estimated similarly to the same size as Switzerland. (ATAG, 2012). It is forecast that by 2026, the industry will contribute $1 trillion to world GDP (ATAG,...

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